Marquette Law ReviewVolume 83Issue 2 Winter 1999 Article 5

State Deceptive Trade Practices and ConsumerProtection Acts: Should Wisconsin Lawyers beSusceptible to Liability Under Section 100.20?Amy Algiers Anderson

Follow this and additional works at: http://scholarship.law.marquette.edu/mulr

Part of the Law Commons

This Article is brought to you for free and open access by the Journals at Marquette Law Scholarly Commons. It has been accepted for inclusion inMarquette Law Review by an authorized administrator of Marquette Law Scholarly Commons. For more information, please contactmegan.obrien@marquette.edu.

Repository CitationAmy Algiers Anderson, State Deceptive Trade Practices and Consumer Protection Acts: Should Wisconsin Lawyers be Susceptible to LiabilityUnder Section 100.20?, 83 Marq. L. Rev. 497 (1999).Available at: http://scholarship.law.marquette.edu/mulr/vol83/iss2/5

STATE DECEPTIVE TRADE PRACTICES ANDCONSUMER PROTECTION ACTS: SHOULD

WISCONSIN LAWYERS BE SUSCEPTIBLE TOLIABILITY UNDER SECTION 100.20?

I. INTRODUCTION

Every state in this country has enacted a deceptive trade practice orconsumer protection statute. Although these statutes vary from state tostate and may be modeled after different federal acts, they all have thesame basic purpose-to protect the public from unfair or deceptive actsor practices with respect to the sale of goods or services. It is theapplication of these statutes to those who supply services, rather thangoods, which has produced mixed results among the states. Perhaps themost surprising result has occurred in jurisdictions that have appliedthese acts to certain types of attorney conduct, including advertising by

1. The corresponding state statutes are as follows: ALA. CODE § 8-19-5 (1993); ALASKASTAT. § 45.50.471 (Michie 1998); ARIz. REV. STAT. ANN. § 44-1522 (West 1994); ARK. CODEANN. § 4-88-107 (Michie 1996); CAL. Bus. & PROF. CODE §§ 17200, 17500 (West 1997); CAL.CIV. CODE § 1770 (West 1985 & Supp. 1995); COLO. REV. STAT. ANN. § 6-1-105 (West1996); CONN. GEN. STAT. ANN. § 42-110b (West 1992 & Supp. 1999); DEL. CODE ANN. tit. 6,§ 2513 (1993 & Supp. 1999); FLA. STAT. ANN. § 501.204 (West 1997); GA. CODE ANN. § 10-1-393 (1994 & Supp. 1999); HAW. REV. STAT. ANN. § 481A 3 Michie 1999); IDAHO CODE §48-603 (1997); ILL. COMP. STAT. 815/505-2 (West 1993 & Supp. 1995); IND. CODE ANN. §24 5-0.5-3 (West 1998); IOWA CODE ANN. § 714.16(2) (West 1993 & Supp. 1995); KAN.STAT. ANN. § 50-626 (1994); KY. REV. STAT. ANN. § 367.170 (Michie 1998); LA. REV. STAT.ANN. § 51.1405 (West 1987); ME. REV. STAT. ANN. tit. 5, § 207 (West 1989); MD. CODEANN., COM. LAW I § 13-303 (1990 & Supp. 1994); MASS. GEN. LAWS ANN. ch. 93A, § 2(West 1997); MICH. COMP. LAWS ANN. § 445.903 (West 1989); MINN. STAT. ANN. § 325D.44(West 1995); MISS. CODE ANN. § 75-24-5 (1991 & Supp. 1999); Mo. ANN. STAT. § 407.020(West 1990 & Supp. 1999); MONT. CODE ANN. § 30-14-103 (1993); NEB. REV. STAT. § 59-1602 (1998); NEV. REV. STAT. ANN. § 598.0914 (Michie 1998); N.H. REV. STAT. ANN. § 358-A:2 (1995); N.J. STAT. ANN. § 56:8-2 (West 1989); N.M. STAT. ANN. § 57-12-2 (Michie 1999);N.Y. GEN. BUS. LAW § 349 (McKinney 1999); N.C. GEN. STAT. § 75-1.1 (1994); N.D. CENT.CODE § 51-15-02 (1989); OHIO REV. CODE ANN. § 1345.02 (West 1993 & Supp. 1998); OKLA.STAT. ANN. tit. 201 § 3 (1997); OR. REV. STAT. §§ 646.607, 646.608 (1997); 73 PA. CONS.STAT. ANN. § 201-3 (1993 & Supp. 1995); R.I. GEN. LAWS § 6-13.1-2 (1992); S.C. CODE ANN.§ 39-5-20 (Law. Co-op. 1985 & Supp. 1994); S.D. CODIFIED LAWS § 37-24-6 (Michie 1994);TENN. CODE ANN. § 47-18-104 (1995 & Supp. 1998); TEX. Bus. & COM. CODE ANN. § 17A6(West 1987 & Supp. 1995); UTAH CODE ANN. § 13-5-2.5 (1999); VT. STAT. ANN. tit. 9, § 2453(1993); VA. CODE ANN. § 59.1-200 (Michie 1998); WASH. REV. CODE ANN. § 19.86.020(West 1999); W. VA. CODE § 46A-6-104 (Michie 1998); WIS. STAT. ANN. § 100.20 (West1998); WYO. STAT. ANN. § 40-12-105 (1993). See also Shelley D. Gatlin, Attorney LiabilityUnder Deceptive Trade Practices Acts, 15 REV. LrTIG. 397,399-400, n. 9 (1996).

MARQUETTE LAW REVIEW

lawyers and other commercial or entrepreneurial aspects of the practiceof law.

This Comment seeks to provide an overview of the application ofconsumer protection acts as well as to propose an extension of theapplication of Wisconsin's Deceptive Trade Practices Acte to certainaspects of the practice of law! Section II provides a brief generalhistory of unfair trade practice and consumer protection acts, includinghow they developed and their general purposes. Section III includes anoverview of the conflicting positions taken by courts and legislaturesfaced with the issue of whether to apply their state's deceptive trade orconsumer protection statute to the conduct of attorneys. Section IVdiscusses a client's typical methods of recovery against an attorney, suchas a malpractice action, and explains how a claim brought under anunfair trade statute would differ. Section V examines Wisconsin'sDeceptive Trade Practices Act4 and concludes with a recommendationthat the Wisconsin Department of Agriculture, Trade and ConsumerProtection Division issue a ruling extending the scope of section 100.20to include unfair and deceptive conduct by lawyers, limited to thecommercial and entrepreneurial aspects of law.

II. THE HISTORY OF DECEPTIVE TRADE PRACTICE AND CONSUMER

PROTECTION ACTS

Consumer protection legislation is a relatively new concept,developed primarily in the past three decades.5 The purpose of thesestatutes is "to provide a private cause of action for consumers injured byunfair or deceptive commercial practices."' The Uniform DeceptiveTrade Practices Act7 served as a model for some states; others basedtheir statutes on the Sherman Antitrust Act' or the Federal Trade

2 See WIS. STAT. ANN. § 100.20 (West 1998). Section 100.20 gives the Department ofAgriculture, Trade and Consumer Protection "the ability to create rules that regulate [unfair]business practices." WISCONSIN DEPARTMENT OF AGRICULTURE, TRADE AND CONSUMERPROTECTION, WHEN A CONSUMER FILES A COMPLAINT AGAINST YOU OR YOURBUSINESS: ENFORCEMENT OF WISCONSIN'S FAIR TRADE PRACrICES LAWS. Rulespromulgated by the Department are part of the Wisconsin Administrative Code. See id.

3. See infra text accompanying notes 146-55.4. See WIS. STAT. ANN. § 100.20 (West 1998).5. See Gatlin, supra note 1 at 399.6. Id. at 400.7. UNIFORM DECEPTIVE TRADE PRAcnIcES AcT § 551-9, 7A U.L.A. 274 (1985 &

Supp. 1993).8. 15 U.S.C. §§ 1-78 (1988).

[83:497

CONSUMER PROTECTION ACTS

Commission Act of 1938. 9 The development of these laws has beenattributed to "the increasingly impersonal nature of the marketplaceand consumer dissatisfaction with the traditional commercial lawremedies for mistreatment by large-scale business organizations."10

Wisconsin's Deceptive Trade Practices Act provides: "[m]ethods ofcompetition in business and trade practices in business shall be fair.Unfair methods of competition in business and unfair trade practices inbusiness are hereby prohibited."11 The Wisconsin Legislature enacted itsversion of an unfair trade practice act in 1921,12 well before most otherstates had done so. This Comment will examine Wisconsin's unfaircompetition statute more thoroughly in Section V. First, this Commentwill review the approaches taken by other states, ranging from judicialapplication to attorneys to legislative exclusion of attorney conduct.

III. LIABILrTY OF ATTORNEYS UNDER DECEPTIVE TRADE PRACTICEAND CONSUMER PROTECTION ACTS

A. Liability Extended to Attorneys

An attorney's liability under a deceptive trade practice act was firstrecognized by the Fourth Circuit Appellate Court of Louisiana in Reedv. Allison & Perrone.13 The defendant attorneys operated a legal clinicand used newspaper advertisements to promote the services of theirclinic. 4 The plaintiffs, attorneys who also operated a legal clinic, allegedthat the defendants' advertisements were "misleading, confusing, anddeceptive" and had damaged plaintiffs' business and reputations. 5 Theysought an injunction under the Louisiana Unfair Trade Practices andConsumer Protection Law,16 preventing defendants from furtheradvertising. 7

The defendants conceded that a portion of one of their

9. 15 U.S.C. § 45(a)(1) (1994).10. Randall S. Hetrick, Comment, Unfair Trade Practices Acts Applied to Attorney

Conduct: A National Review, 18 J. LEGAL PRoF. 329 (1993) (citing William A. Lovett, StateDeceptive Trade Practice Legislation, 46 TUL. L. REV. 723,725 (1972)).

11. See WIS. STAT. ANN. §100.20 (West 1998).12. 1921 Wis. Laws ch. 571.13. 376 So. 2d 1067 (La. Ct. App. 1979).14. See id. at 1068.15. Id.16. See LA. REV. STAT. ANN. § 51:1405A (West 1972)17. See Reed v. Allison & Perrone, 376 So. 2d 1067,1069 (La. Ct. App. 1979).

1999]

MARQUETTE LAW REVIEW

advertisements might have been misleading.'8 That particularadvertisement stated, "[w]e have resolved the problems of roughly 60%of our clients at the initial consultation with no additional fee."'9

Despite defendants' admission, the court refused to grant theinjunction on the grounds that the plaintiffs had failed to prove that thedefendants' false advertisements had caused them "irreparable injury."'

However, the court's holding proved very significant. It clearly statedthat attorney advertising is subject to Louisiana's Unfair Trade PracticesAct because it constitutes a "trade" or "commerce" as defined in theAct.2 In addition, the court noted that although attorneyadvertisements are also subject to review by the state bar association,they are not immune from liability under state legislation.' This was anunprecedented step for any court and proved to be the beginning of anextension of liability under deceptive trade practices acts.

In 1980, the Court of Civil Appeals of Houston, Texas went a stepfurther than the Reed court and held that the Texas Deceptive TradePractices Act" "applied to the purchase or acquisition of legalservices."'24 The plaintiffs in this case sought recovery from thedefendant attorney for defective preparation of a petition for the namechange of a minor child.' With respect to this name change, the trialcourt found that Attorney DeBakey had failed "to secure theappointment of an attorney ad litem," filed a petition that he knew to bedefective, and basically offered nothing of value to the plaintiffs.26

Among other things, the plaintiffs alleged a cause of action underTexas's Deceptive Trade Practices Act.27 The court rejected thedefendant's argument that the plaintiffs were not "consumers" asrequired by the Act because they were purchasing "services of anintangible nature. '" The court held that the attorney's actionsconstituted "services" under the Act and that the plaintiffs were

18. See id. at 1069.19. Id. The opinion offers no further explanation of exactly what made this statement

misleading.20. Id.21. See id. at 1068-69.22. See id. at 1068.23. TEx. Bus. & COM. CODE ANN. § 17.45 (West 1979).24. DeBakey v. Staggs, 605 S.W.2d 631, 633 (Tex. App. 1980).25. See id.26. See id. at 632.27. See id.28. Id. at 633.

[83:497

CONSUMER PROTECTIONACTS

"consumers" who purchased these services. The court awarded theplaintiffs both attorney's fees and treble damages as mandated by theAct;30 an obvious advantage to recovery under this act rather than atypical malpractice cause of action.'

The Supreme Court of Connecticut encountered a much differentsituation in Heslin v. Connecticut Law Clinic of Trantolo & Trantolo.32

The defendant attorneys were under investigation by the StateCommissioner of Consumer Protection for alleged misleadingadvertising.3 This advertising included misuse of the term "legal clinic"and misrepresentations as to their fees and the fees of other attorneysoffering the same services as the clinic?4 The Commissioner ordered aninvestigative demand pursuant to the Connecticut Unfair TradePractices Act and the defendant refused to comply claiming a lack ofauthority on the part of the Commissioner."

The point of contention in this inquiry was whether the "provision oflegal services constitutes 'the conduct of any trade or commerce,"' asrequired by the Connecticut statute.3 The court noted that many suchacts do not mention legal services, primarily because they were oftenenacted "before lawyers engaged in advertising."'37 In fact, theConnecticut statute, as well as its equivalent in many other states, wasenacted before the seminal case of Bates v. State Bar of Arizona.'

The United States Supreme Court in Bates held that advertising bylawyers was protected commercial speech under the First Amendment.39

This decision was in part based on the fact that "the belief that lawyersare somehow 'above' trade has become an anachronism."' The Courtrealized that permitting lawyer advertising would expose the public to arisk that lawyers might engage in misleading or deceptive advertisingand that regulation would be necessary to minimize that risk.41

29. Id.30. See id. at 634.31. See infra text accompanying notes 123-28.32. 461 A.2d 938 (Conn. 1983).33. See id. at 939.34. See id.35. See id. at 940.36. Id. at 941.37. Id.38. 433 U.S. 350,380-82 (1977).39. See id. at 380.40. Id. at 371-72.41. See id. at 379.

1999]

MARQ UETTE LAW REVIEW

The Heslin court found the reasoning from Bates to bedipositive-awyers who advertise are engaging in trade.42 In addition,the court looked at the intent of the Connecticut Legislature, whichprovided that interpretations of its statute should be guided by theFederal Trade Commission and the federal courts' interpretations ofsection 45(a)(1) of the Federal Trade Commission Act.43 Although thefederal courts have not addressed whether section 45(a)(1) applies toattorneys, the Supreme Court has applied the Act to medicalprofessionals." Furthermore, the Court has "decided that the practiceof law may constitute the conduct of a trade or commerce under theSherman Anti-Trust Act."45 Based on Supreme Court precedent, theHeslin court concluded that "the federal courts would construe the FTCAct as applying to attorneys" under this particular set of facts.'

The court also quickly disposed of the defendants' contention thatapplication of the Unfair Trade Practices Act would be a violation of theseparation of powers doctrine under the Connecticut Constitution.The defendants argued that because the constitution grants "thejudiciary exclusive authority to regulate the professional conduct ofattorneys" it implicitly prohibits the regulation of attorneys by thelegislature.4 Although the court conceded that conduct covered by theConsumer Unfair Trade Protection Act might also overlap with areasunder control of the court, it held that this does not render theapplication of the statute to lawyers unconstitutional.49 The disciplinaryfunction of the judiciary differs significantly from the Act in oneaspect-it does not allow for recovery by those who are victims of

42. See Heslin v. Connecticut Law Clinic of Trantolo, 461 A.2d 938, 941-42 (Conn.1983).

43. 15 U.S.C. § 45(a)(1) (1976). This section provides: "Unfair methods of competitionin or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce,are declared unlawful." Id.

44. See American Medical Association v. Federal Trade Commission, 688 F.2d 443 (2dCir. 1980), affd by an equally divided Court, 455 U.S. 676 (1982).

45. Heslin, 461 A.2d at 942, referring to the Sherman Anti-Trust Act, 15 U.S.C. § 1 asapplied to attorneys in Goldfarb v. Virginia State Bar, 421 U.S. 773, 786-88 (1975).

46. Heslin, 461 A.2d at 942.47. See id. at 943. The relevant portion of the Connecticut Constitution provides: "[t]he

powers of government shall be divided into three distinct departments, and each of themconfided to a separate magistracy, to wit, those which are legislative, to one; those which areexecutive, to another; and those which are judicial, to another." Id. (citing CONN. CONST. art.V § 1).

48. See Heslin, 461 A.2d at 943.49. See id.

[83:497

CONSUMER PROTECTIONACTS

attorney misconduct-and this is where the Act steps in.'Although it may appear that the Connecticut Supreme Court

opened the floodgates of claims against lawyers under the Act, the scopeof its holding was restricted by a later decision. In Haynes v. Yale-NewHaven Hospital, the court held that the Act covered "only theentrepreneurial aspects of the practice of law" and not "professionalnegligence... [i.e.] malpractice.""1 The court was only willing to applythe Act to claims against attorneys that differed from traditionalmalpractice claims and recognized that the Act has a unique purpose.'

B. Suggested Extension of Liability to Attorneys

Several state courts have held that although in a particular case alawyer's conduct did not fall within the purview of that state's deceptivepractices act, certain conduct would be subject to the act. For example,in Short v. Demopolis, the Supreme Court of Washington held thatWashington's Consumer Protection Act governs "certainentrepreneurial aspects of the practice of law."' These aspects include"how the price of legal fees is determined, billed, and collected and theway a law firm obtains, retains, and dismisses clients."'

In this case, a law firm sought recovery of fees that a former clientallegedly owed to it.5 The client filed a counterclaim, disputing the feesowed and alleging both malpractice and violations of Washington'sConsumer Protection Act.m The court looked to legislative intent inorder to interpret the statute.s

Like the Connecticut Legislature, the Washington Legislature hadprescribed that because the Consumer Protection Act was modeledafter federal law, federal law should be followed in interpreting itsreaches.' The court reasoned that lawyers should not be categoricallyexempted from the Act since Washington's law was adopted practically

50. See id. at 945.51. 699 A.2d 964, 972 (Conn. 1997).52. See id.53. 691 P.2d 163,168 (Wash. 1984).54. Id.55. See id. at 164. Some insurers have "reported that malpractice claims filed in

response to fee actions comprise approximately twenty percent of all claims againstattorneys." RONALD E. MALLEN & JEFFREY M. SMITH, LEGAL MALPRACrICE § 1.1, at 6(3d ed. 1989).

56. See id. at 165.57. See i at 166.58. See id. at 168.

1999]

MARQUETTE LAW REVIEW

verbatim from federal antitrust laws and the federal law no longerfollowed the "learned professions"59 exception.6 The intent of the Act,in the court's view, was "to bring within its reaches every person whoconducts unfair or deceptive acts or practices in any trade orcommerce."

61

The Short court also explored "whether the application of the CPAto attorneys would be an unconstitutional legislative invasion of thejurisdiction of the Supreme Court in its power to regulate the practice oflaw."62 The plaintiff attorneys argued that application of the Act to thepractice of law would violate the separation of powers doctrine becausethe state constitution vested the state supreme court with the power toregulate the legal field.? The court recognized that the purposes of thejudicial disciplinary system and the Consumer Protection Act were verydifferent and could coexist without violating the constitution.'

The Short case provides two important factors for courts to look atwhen making the determination of whether to extend the application ofconsumer fraud and unfair trade practices statutes to the practice of law.First, would extension of coverage in the particular situation be in thepublic interest? Second, is the particular situation presented regulatedby the state supreme court and if so, can the two forms of regulationcoexist without stepping on each other's toes?

The Washington Supreme Court briefly mentioned anotherconsideration in Roach v. Mead.6? In this case, the plaintiff client, uponinvestment advice by his attorney, made personal loans to the attorneythat the attorney never repaid.' The attorney subsequently filed forbankruptcy and the client sued the attorney's partnership, allegingvarious causes of action including recovery under the state's UnfairTrade Practices Act.67 The claim under the Act alleged "that thepartnership created a likelihood of confusion concerning the service it

59. "Learned Professions" such as medicine, theology, and law were generally exemptedfrom certain statutory provisions. For more on this topic, see generally Debra D. Burke, TheLearned Profession Exemption of the North Carolina Deceptive Trade Practices Act: TheWrong Bright Line?, 15 CAMPBELL L. REv. 223 (1993).

60. See Short v. Demopolis, 691 P.2d 163, 168 (Wash. 1984).61. Id.62 Id. at 169.63. See id.64. See id. at 170.65. 722 P.2d 1229, 1234 (Wash. 1986)66. See id. at 1231.67. See id.

f83:497

CONSUMER PROTECTION ACTS

provided to plaintiff,... represented" that it had "qualities that it didn'tpossess..., and misleadingly represented the nature of the loan."6

To determine whether the Unlawful Trade Practices Act coveredlegal services, the court looked at "the customary or predominantpurpose of the legal'services obtained by [the] plaintiff."69 The courtultimately found that the Act did not cover the particular situation athand because the plaintiff was seeking recovery from the partnershipand the attorney was not acting within the scope of his employment."However, it did suggest that if the legal services sought were "generallyand customarily for a personal, family, or household purpose," the Actwould govern the lawyer's conduct.7

From these cases we can develop a framework for determiningwhether an attorney's conduct should be governed by a deceptive tradepractices act. When the "conduct" engaged in is deceptive advertising,there is a strong presumption that advertising constitutes a "trade" or"commerce" meant to be governed by the act. Likewise, if coverage ofthe conduct that the attorney engaged in would serve the public interest,the act should govern the conduct. The situation is a bit stickier,however, when the conduct engaged in is conduct that typically wouldfall under a malpractice claim-for example, negligent handling of acase, failure to make timely filings with the court, or omission of a causeof action.' Is application of a deceptive trade practices act reallynecessary at that point or is it just another, most likely unnecessary,route for recovery in our litigious society? The answer may becomeclearer after an examination of decisions from courts that have rejectedapplication of such acts to lawyers.

C. Refusal to Extend Liability to Attorneys

At least six states have explicitly refused to extend liability undertheir Unfair Trade or Consumer Protection Acts; however, they havedone so in two different ways. Three of the six-Maryland, NorthCarolina, and Ohio-have expressly excluded lawyers via the statutewhile the other three, absent statutory exclusion, have judicially createdexceptions.

68. Id.69. Id.70. See id.71. Id at 1234-35.72. See infra text accompanying notes 112-28.

1999]

MARQ UETTE LAW REVIEW

1. Statutory Exclusion

The Ohio Legislature chose to specifically exclude lawyers from its"Unfair, Deceptive, or Unconscionable Acts or Practices" statute. Inrelevant part, the statute defines a "Consumer Transaction" as "a sale,lease.., or other transfer of an item of goods [or] a service... to anindividual... but does not include [a] transaction between... publicaccountants and their clients [or] attorneys, physicians, or dentists andtheir clients or patients."'74 Both North Carolina and Maryland havesimilar provisions. For example, North Carolina's statute provides that"'commerce' includes all business activities, however denominated, butdoes not include professional services rendered by a member of alearned profession."76

This exemption was not part of North Carolina's original Act butwas added in 1977.' Thus far, North Carolina has been the only state tospecifically exclude "members of the 'learned profession." ' 78

Historically, these professions were excluded from antitrust lawsbecause they "were characterized by a spirit of public service. ' 79

However, this is no longer always the case because the Supreme Courthas held that antitrust laws do apply to the "learned professions" incertain circumstances.' Many states' unfair trade practices acts weremodeled after federal antitrust laws; for this reason, it is illogical to usethe "learned profession" standard as a basis for exclusion of the legalprofession from an unfair trade practice act.8"

As noted earlier, many of these statutes were enacted before thelandmark Supreme Court decision in Bates v. State Bar of Arizona.,The Court's holding essentially removed the legal profession from itslofty perch as a profession that was "above trade."" From this

73. OHIO REv. CODE ANN. § 1345.01(A) (West 1998).74. Id. (emphasis added). This is Ohio's version of a "learned profession" exemption.

See Burke, supra note 59.75. See N.C. GEN. STAT. § 75-1.1(b) (1998); MD. CODE ANN., COM. LAW I § 13-104

(1991).76. N.C. GEN. STAT. § 75-1.1(b) (emphasis added).77. See Burke, supra note 59, at 241.7& Id. at 242.79. Id. at 243.80. See Goldfarb v. Virginia State Bar Ass'n., 421 U.S. 773 (1975) (holding learned

professions not "per se exempt" from antitrust laws).81. See id. at 779.82. 433 U.S. 350,380-82 (1977).83. See id.

[83:497

CONSUMER PROTECTIONACTS

conclusion it logically follows that the legal profession, in certaininstances, does engage in trade and is therefore not "above" the realmsof unfair trade practices acts. However, several courts have not come tothis conclusion.

2. Judicial Exclusion

The first court to hold that a state unfair trade practice act did notapply to attorneys was an Illinois Appellate Court in Frahm v.Urkovich.84 In this case, the plaintiffs alleged that the defendant, anattorney who had represented them in various real estate transactions,had given false and misleading information to the plaintiffs.' Thisinformation caused the plaintiffs to cosign a loan for a real estateproject." This project directly benefited the defendant in this case andresulted in a substantial loss to the plaintiffs.' The plaintiffs filed suitagainst the defendant attorney, alleging "attorney malpractice, breach offiduciary duty," and violation of the Illinois Consumer Fraud andDeceptive Business Practices Act.ss

The purpose of the Illinois Act "is to protect consumers andborrowers and businessmen against fraud, unfair or deceptive acts orpractices in the conduct of any trade or commerce.""' The court refusedto apply the Act to attorney conduct and stated that to do so would"necessarily equate the practice of law with an ordinary commercialenterprise. ' The court viewed the defendant's actions as "misconductamounting to professional malpractice" and interpreted the statute asnot applicable to an attorney engaged in the actual practice of law.9' Itdid not see the practice of law as the type of practice that reachesconsumers generally.'

84. 447 N.E.2d 1007 (Il. App. Ct. 1983).85. See id. at 1008.86. See id.87. See id. at 1008-09.88. Id. at 1009.89. Id.90. Frahm v. Urkovich, 447 N.E.2d 1007,1010 (Ml. App. Ct. 1983).91. Id. at 1009.92. See id. at 1014. The Illinois Supreme Court again examined the application of

Illinois' Consumer Fraud and Deceptive Business Practices Act in Cripe v. Leiter, 703 N.E.2d100 (IlM. 1998). In this case the plaintiff alleged that her attorney, the defendant, charged"excessive and unreasonable fees that bore no relationship to the actual time spent...representing [the plaintiff]." Id. at 102. The plaintiff sought recovery under the ConsumerFraud and Deceptive Business Practices Act. See id. The court rejected the plaintiff's claimfor two reasons. First, the court held that legal fees could not be separated from legal

1999]

MARQUETTE LAW REVIEW

The Supreme Court of New Hampshire faced a similar situation inRousseau v. Eshleman.9 This case involved a real estate transaction inwhich the defendant attorney advised his client to purchase acommercial property with an assumable mortgage.9 However, after thesale was completed Eshleman's client "learned that the mortgage wasnot assumable, and that the note instead became a demand note dueand payable at the option of the bank upon the plaintiff's purchase ofthe property."9 The client subsequently "sustained a substantial loss on[the] investment. ' 6 In addition to claims of legal malpractice andnegligent misrepresentation, the client sought recovery and allegedentitlement to treble damages under New Hampshire's ConsumerProtection Act.9

The trial court jury found that "the defendant's actions constituted awillful and knowing violation of the consumer protection act."93 Thesupreme court reversed, holding that the Act did not apply toattorneys.'9 It based its holding on the fact that pursuant to the NewHampshire Constitution, the regulation of attorney conduct was "anarea of shared responsibility between the legislative and judicialbranches of government" and absent specific legislative intent to includeattorneys, the statute was not meant to govern attorney conduct. '0 Thecourt also reasoned that because the state legislature and constitutionhad given the power to regulate the professional conduct of attorneys,application of the consumer protection act to this area could give rise to"practical problems.) 101

The Superior Court of New Jersey has also exempted the legalprofession from liability under New Jersey's Consumer Fraud Act.10,

services, which are not covered by the Act. See id. at 107. Second, the court held that sinceattorneys' fees were regulated by the Rules of Professional Conduct, it was not necessary toprovide an additional remedy for excessive fees. See id. at 106. What the court failed to takeinto consideration is the fact that although an attorney may be subject to disciplinary actionfor charging excessive fees, this offers most plaintiffs little comfort.

93. 519 A.2d 243, 244 (N.H. 1986).94. See id.95. Id.96. Id.97. See id.98. Id.99. See Rousseau v. Eshleman, 519 A.2d 243,245 (N.H. 1986).100. Id.101. Id. The Supreme Court of New Hampshire did not offer any explanation of what

these "practical problems" may be.102 See Vort v. Hollander, 607 A.2d 1339, 1339-42 (N.J. Super. Ct. App. Div. 1992).

[83:497

CONSUMER PROTECTION ACTS

The case that led to this holding involved a fee dispute between anattorney and his client.1" The client refused to pay fees in excess of analleged fee cap agreement between the attorney and client 1 4 Theattorney sought recovery of the fees and the client filed a counterclaim,asserting violations of the Consumer Fraud Act and legal malpractice.0 5

The court held that "it is clear that attorney's services do not fallwithin the intendment of the Consumer Fraud Act."'' It based thisholding on a prior case where the court concluded that real estatebrokers, like other "professionals", perform an activity that "isrecognized as something beyond the ordinary commercial seller ofgoods or services-an activity beyond the pale of the act underconsideration. ' '""l Although the New Jersey Legislature responded tothis holding by amending the Act to include deceptive practices in thesale of real estate, it did not amend the Act to include professionals suchas doctors, dentists, and lawyers."° The court basically interpreted thelegislature's failure to include the "learned professions" as anendorsement of its prior holding in Nevroski.1 Finally, the court notedthat the New Jersey Supreme Court regulates the practice of law in NewJersey,"' a possible separation of powers issue."

103. See id. at 1340-41.104. See id. at 1341.105. See id.106. Id. at 1342.107. Id. (quoting Neveroski v. Blair, 141 NJ. Super. 365,358 (1976)).108. See id. at 1339-42.109. See id.110. See id. The court was alluding to the separation of powers doctrine as discussed

(and dismissed) by the Supreme Court of Connecticut in Heslin v. Connecticut Law Clinic ofTrantolo and Trantolo, 461 A.2d 928 (Conn. 1983) and the Supreme Court of Washington inShort v. Demopolis, 691 P.2d 163 (Wash. 1984). Both the Heslin and Short courts recognizedthat unfair trade practices acts serve a different purpose than judiciary's regulation ofattorney conduct and the two can peacefully, and constitutionally, coexist.

111. It should also be noted that three additional states have examined whether unfairtrade practices statutes apply to lawyers and have suggested that they do not. See Robertsonv. White, 633 F. Supp. 954, 978 (W.D. Ark. 1986) (holding that complaint failed todemonstrate any fraud by lawyer or accountant but regardless, Consumer Protection Act isnot meant to regulate lawyer-client or accountant-client relationships); Keyser v. St. Mary'sHosp., 662 F.Supp. 191, 194 (D. Idaho 1987) (refusing to apply Consumer Protection Act tomedical profession); Gatten v. Merzi, 579 A.2d 974, 976 (Pa. Super. Ct. 1990), app. denied,596 A.2d 157 (Pa. 1991) (holding that application of Unfair Trade Practices and ConsumerProtection law to physicians would" . . . mak[e] a physician the absolute guarantor of both histreatment and the anticipated results.").

1999]

MARQUETTE LAW REVIEW

IV. OTHER CAUSES OF AcTION AGAINST ATTORNEYS

Although some states have held that attorneys can be liable to theirclients under consumer fraud and unfair trade practices statutes, this isobviously not the common route of recovery for most plaintiffs. Themajority of "actions brought by clients against their attorneys are fornegligence [or] a fiduciary breach. 112 Liability under any "malpractice"theory must be premised on the following: the existence of a duty, whichwas breached by the lawyer and that breach was the proximate cause ofthe plaintiff's (client's) damage."3

The extent of the attorney's duty depends on the nature of theattorney-client relationship and a breach of that duty will typically giverise to a claim of negligence."4 To determine whether a duty existed, thefirst inquiry is "whether the attorney undertook to perform any service[for the client/plaintiff]." ' 5 However, the issue in a legal malpractice suitusually is not whether a duty existed, but the extent of that duty.116

Proving causation presents the greatest hurdle for a plaintiff in alegal malpractice action. To establish causation, the plaintiff must provethat "the [plaintiff's] loss would not have occurred or that the amountwould have been less.., but for the attorney's conduct. 117 This is oftenreferred to as "a trial within a trial.'1 . Not only must the plaintiff showthat the attorney was negligent, but he or she must also prove that thenegligence was the reason that the harm occurred-typically, that it wasthe reason that the plaintiff lost his or her case."'

A client may also have a cause of action against his or her attorneybased on fraud. The same basic rules that apply to any defendant whocommitted fraud also apply to a professional who committed fraud. Theprimary difference is that "an attorney's advice or opinion, if knowinglyfalse, may constitute fraud. ' '... A plaintiff "in a fraud case must establishthat there was a '(1) [F]alse representation or concealment of a materialfact, (2) reasonably calculated to deceive, (3) made with intent to

112. MALLEN & SMITH, supra note 55, § 8.1, at 401.113. See id. § 8.2, at 401.114. See id. at 402.115. Id. § 8.2, at 405.116. See id. at 407.117. Id. § 8.2, at 412 (citing Molever v. Roush, 732 P.2d 1105 (Ariz. App. 1986)); Claire

Associates by Livaditis v. Pontikes, 502 N.E.2d 1186 (Ill. App. 1986); Maryland Casualty Co.v. Price, Smith, Spilman & Clay, 224 F. 271 (S.D.W. Va. 1915)).

118. See MALLEN & SMrrH, supra note 55, § 8.3, at 412.119. See id. § 8.11, at 429.120. Id. § 8.8, at 422.

[83:497

CONSUMER PROTECTION ACTS

deceive, (4) which does in fact deceive, (5) resulting in damage to theinjured party.' 12' Fraud can be difficult to prove, and is not a "favoredaction" for plaintiffs.Y

An action under a consumer fraud and unfair trade practice statutehas several advantages for a plaintiff. First, it is easier to prove aviolation of most statutes than to prove fraud or even negligence."Most statutes "merely require proof of either a representation whichtends to deceive or some act of unfairness." 24 A plaintiff does not needto prove an intent to deceive nor does he or she have to worry aboutcontributory negligence because the "effect of the actor's conduct on theconsuming public" is the relevant factor.' s

In addition, an action under a consumer protection and unfair tradestatute often allows the plaintiff to recover more money than in a legalmalpractice or fraud action.1 2 Typically, these statutes allow for trebledamages; "punitive damages for fraud or negligence are to be awardedonly when the wrong is done willfully or there are other extenuatingcircumstances evidencing a reckless disregard for the plaintiff's rights. ' 7

Finally, most fraud statutes allow the plaintiff to recover attorney's fees,especially in cases where the wrongdoer's action was wiUlful."

Consumer fraud and unfair trade practices acts appear to be an easyroute of recovery for the victim of the actions these statutes seek toprevent. So why aren't more plaintiffs turning to these statutes,especially in Wisconsin? A more careful inspection of Wisconsin'sUnfair Trade Practices statute reveals the answer.129

V. UNFAIR TRADE PRACTICES IN WISCONSIN

A. Origin and Interpretation

Section 100.201" was enacted in 1921. The purpose of the statute isto regulate unfair trade practices and unfair methods of competition in

121. See Burke, supra note 59, at 236 (citing Ragsdale v. Kennedy, 209 S.E.2d 494, 500(N.C. 1974)); see also Goerke v. Vojvodich, 226 N.W. 2d 211 (Wis. 1975).

122. MALLEN & SMITH, supra note 55, § 8.8, at 423.123. See Burke, supra note 59, at 236-37.124. Id. at 237.125. Id.126. See id. at 238.127. Id. at 238.128. See Burke, supra note 59, at 240.129. See Wis. STAT. ANN. § 100.20 (West 1998).130. Id.

1999]

MARQUETTE LAW REVIEW

business. Section 93.01 defines the term "business":The following terms, whenever used in chs. 93 to 100 or in anyother regulation thereunder..., have the meaning hereindicated. (1m) "Business" includes any business, except that ofbanks, savings banks, savings and loan associations and insurancecompanies. "Business includes public utilities andtelecommunications carriers to the extent that their activities...are exempt from regulation from the public servicecommission."'The statute was patterned after section 5 of the Federal Trade

Commission Act of 1914.132 Although this statute was enacted at thebeginning of the century, it was not really used until the late 1960's andearly 1970's.133 The Department of Agriculture, Trade and ConsumerProtection has the job of regulating business under this Act andassessing what constitutes "unfair" business practices."3 TheDepartment "has been largely guided by the rules and decisions undersection 5 of the FTC Act."'35 The FTC has broad discretion in makingdeterminations of fairness and has developed a flexible standard thatlooks to public policy considerations to determine whether a particularact or practice is unfair.136

B. Applications

Section 100.20 has been applied to a variety of unfair practices.These unfair practices are identified through both general and specificorders promulgated by the Department of Agriculture, Trade andConsumer Protection. For example, through general orders, theDepartment has classified deceptive home improvement trade practicesas an area governed by section 100.20.37 Other areas include referralselling plans, chain distributor schemes, and certain landlord-tenantsituations." Wisconsin has not looked at whether this statute shouldapply to the "business" practices of members of the "learnedprofessions."

131. Wis. STAT. ANN. § 93.01 (West 1998).132. 38 Stat. 719 (1914), 15 U.S.C. § 45(a)(1) (1995).133. See James D. Jeffries, Protection for Consumers Against Unfair and Deceptive

Business, 57 MARQ. L. REV. 559,572 (1974).134. See id. at 573.135. Id. at 573 (referring to 15 U.S.C. § 45(a)(1) (1970).136. See Jeffries, supra note 133, at 573-74.137. See id. at 578 (referring to WIS. ADMIN. CODE, ch. Ag 110 (1974)).138. See Jeffries, supra note 133, at 580-97.

[83:497

CONSUMER PROTECTIONACTS

Should Wisconsin decide to hold professionals liable under section100.20, it would do so under subsection (1t).' 39 This section makes itunlawful "for a person to provide any service... that facilitates orpromotes an unfair method of competition in business [or] an unfairtrade practice in business."' Attorneys and other professionals aresupplying a service, not a product.

C. Remedies

The remedies available under section 100.20 are found in subsectionsthree through six."' Subsection three gives the Department the authorityto issue an order enjoining a party "from employing any method ofcompetition in business or trade practice in business which isdetermined... to be unfair." 42 In addition to injunctive relief, undersubsection five, any person suffering pecuniary loss because of aviolation of an order issued under section 100.20 "may sue for damagesand recover twice the amount of [his or her] monetary loss, togetherwith costs [and] a reasonable attorney's fee."' 43

While this may sound like a generous remedy, there remains oneproblem for the client injured by his or her attorney. According to thelanguage of the statute, damages may be recovered only when thedefendant violates an order of the Department." This means that for aplaintiff to have a cause of action under section 100.20, the Departmentof Agriculture must have promulgated a code section (general order)specifically prohibiting the conduct committed by the defendant, as itdid in cases of home improvement or chain distributor schemes.' 45

D. Application to the Legal Profession

There is no language in section 100.20 that precludes a court fromholding an attorney liable under the statute. In fact, the statutespecifically makes it unlawful for any person to provide a service inviolation of the statute and the legislature did not exclude the practice oflaw from the definition of business found in section 93.01.'" There is no

139. See WIS. STAT. ANN. § 100.20(lt) (West 1998).140. Id. (emphasis added).141. See WIS. STAT. ANN. § 100.20(3)-(6) (West 1998).142. § 100.20(3).143. § 100.20(5).144. See id.145. See Jeffries, supra note 133, at 577.146. See WIS. STAT. ANN. §93.01 (West 1997).

1999]

MARQUETTE LAW REVIEW

reason that the Department of Agriculture, Trade and ConsumerProtection should not issue an order prohibiting members of the legalprofession from providing any services that facilitate or promote anunfair method of competition or an unfair trade practice in business.

In addition, as noted above, the Wisconsin Legislature has providedthat interpretation of the statute should be guided by the federal courts'interpretations of section 45(a)(1) of the Federal Trade CommissionAct.147 This presents a situation exactly like the one discussed by theHeslin court.'" The court was interpreting Connecticut's Unfair TradePractices Act,149 also based on section 45(a)(1)." Based on the UnitedStates Supreme Court's application of section 45(a)(1) to the medicalprofession' and decision that the practice of law may constitute a tradeor commerce under the Sherman Anti-Trust Act, 2 the Heslin court heldthat in certain circumstances, the "federal courts would construe theFTC Act as applying to attorneys." '

Wisconsin should follow Connecticut's lead and allow personsinjured by unfair trade practices engaged in by attorneys to bring anaction under its Deceptive Trade Practices Act. Like Connecticut,however, Wisconsin should limit the extent that attorneys can be heldliable under the Act. Liability should be limited to situations whereattorneys are engaged in the commercial and entrepreneurial aspects oflaw. In addition, application of the Act should be limited to situationswhere it would be in the public interest to prevent the conduct. Thiscould include "how the price of legal services is determined, billed, andcollected and the way a law firm obtains, retains, and dismissescients;"' false and misleading advertisements; and other situationswhere an attorney is not providing traditional "legal services" to a client.This would not include negligence and other traditional legalmalpractice actions.55

147. See 15 U.S.C. § 45(a)(1) (1997).148. See Heslin v. Connecticut Law Clinic of Trantolo & Trontolo, 461 A.2d 938 (Conn.

1983); see also supra text accompanying notes 32-50.149. See CONN. GEN. STAT. ANN. § 42-110b (West 1992 & Supp. 1999).150. See Heslin, 461 A.2d at 942.151. See Am. Med. Ass'n v. Fed. Trade Comm'n, 638 F.2d 443 (2d Cir. 1980), affd by an

equally divided court, 455 U.S. 676 (1982).152. See Goldfarb v. Virginia State Bar, 421 U.S. 773,786-88 (1975).153. Heslin, 461 A.2d at 942154. These standards were recognized by the Washington Supreme Court in Short v.

Demopolis, 691 P.2d 163,168 (Wash. 1984).155. See supra text accompanying notes 112-28.

[83:497

CONSUMER PROTECTION ACTS

Additionally, Wisconsin courts would need to address whetherapplying the Act to attorney conduct would violate the separation ofpowers doctrine under the Wisconsin Constitution. However, the courtsshould recognize that Wisconsin's Rules of Professional Conduct andthe Act serve distinct purposes and provide different remedies. There isno legitimate reason to deny a proper plaintiff a remedy through theAct in certain limited circumstances.

VI. CONCLUSION

Unquestionably, the nature of the legal profession is changing. Thepublic and even the courts no longer perceive legal professionals as"above trade." 156 It is permissible for lawyers to engage inadvertisingTand their practices can be subject to anti-trust laws." Alongwith these changes come increased risk of liability for attorneys undertheories of negligence, fraud, and in some circumstances, unfair tradeconduct.

Attorneys should be held accountable for their actions and if theseactions include a violation of a consumer unfair trade protection act,then they must face the consequences. By holding attorneys liableunder these acts in limited circumstances, courts are not opening thefloodgates of litigation. On the contrary, liability under such an actwould be premised only on unfair and deceptive conduct. Theavailability to plaintiffs of twice the amount of pecuniary loss along withcosts including attorney's fees,59 will serve as a strong deterrent to theattorney who engages in unfair and deceptive conduct and as anappropriate remedy to members of the public damaged by such conduct.

AMY ALGIERS ANDERSON

156. Bates v. State Bar of Arizona, 433 U.S. 350,380-82 (1977).157. See id.158. See generally Goldfarb v. Virginia State Bar Assoc., 421 U.S. 773, 793 (1975).159. See WIs. STAT. ANN. § 100.20(5) (West 1998).

1999]